FAPRI report shows mixed bag for U.S. agriculture

The University of Missouri Food and Agricultural Policy Research Institute (FAPRI) recently released an update to its annual baseline report, finding that net farm income has fallen due to lower crop prices.

United States net farm income in 2024 was $137 billion, falling slightly below the United States Department of Agriculture ‘s (USDA) September forecast and $9 billion lower than the 2023 figure, according to the latest update of the annual U.S. farm income and consumer food price report by The Food and Agricultural Policy Research Institute (FAPRI) at the University of Missouri. Further declines in income are projected in 2025 as some moderation in production expenses and high cattle prices are not enough to offset the impact of lower crop prices.

Pat Westhoff, FAPRI director, noted that these lower projections should be viewed with the appropriate context of historical farm finance conditions.

“When adjusted for inflation, we anticipate the decline in farm income between 2022 and 2025 to be $67 billion,” said Westhoff. “However, despite a 35% drop, inflation-adjusted net farm income remains above the levels we experienced from 2015 to 2020.”

FAPRI’s projections indicate a $32 billion drop in 2024 crop receipts due to lower prices for many grains, oilseeds and other field crops. Livestock receipts, on the other hand, will see a healthy $19 billion increase, the result of higher cattle prices. Overall farm production expenses are expected to decline in 2024 after seeing increases in 2022 and 2023. Looking ahead, farm income is projected to decline further in 2025, with a modest recovery in 2026.

Related: Drought update: Looking ahead at the fall season’s impact

For the third straight year, payments under the price loss coverage (PLC) and agriculture risk coverage (ARC) programs will be below $1 billion in 2024. The fall in crop prices since 2022 sees payments under these programs rise to $5 billion in 2025 and 2026.

“From the consumer perspective, we’re also anticipating a slowdown in food inflation,” said Westhoff. “Our projections indicate a rate of 2.2% in 2024, dropping down to 1.6% in 2025.”

The U.S. farm income and consumer food price report incorporates commodity supply, demand, and price projections from the center’s August baseline update, as well as USDA’s Economic Research Service (ERS) farm income data, to generate estimates. Taken together, these reports form an overview of the agriculture and food sector and the key drivers of farm incomes.

Assuming normal growing conditions in the coming years, the report projects crop prices will remain near 2024-25 levels for many crops. Between the 2025-26 and 2029-30 marketing years, corn prices are projected to average $4.12 per bushel, soybeans will average $9.98 per bushel and wheat prices will average $5.70 per bushel.

Related: Higher U.S. prices push beef exports to shrink; domestic demand holding steady

On the livestock side, relatively low feed prices, and high meat and dairy prices, would usually prompt an expansion in the livestock sector. However, the report noted that years of drought and low returns have decreased the size of the U.S. herd and continue to impact its expansion. The competition for heifers has impacted the dairy sector, which is also facing its own issues regarding weather and animal disease. Beef and dairy prices are therefore projected to remain reasonably strong in the medium term. Conversely, the poultry sector can react more quickly to the reduction in feedstocks since 2022 and prices are projected to fall accordingly.

Hog prices fell in 2023, reducing net returns in 2023 and 2024, despite some moderation in feed costs. Production is forecast to decline by 2026, which the economist say will cause an increase in hog prices and net returns. After dipping in 2022 from reduced demand from China, the report suggests pork exports will increase due to global economic growth and a projected weakening of the dollar against many other currencies after 2024.

Related: More days on feed pushes feedlot supplies higher

Although feed costs are projected to fall significantly, and lower interest rates will reduce interest costs, the report said other costs are flat or increasing. As such, the outlook suggests that total production costs will be largely flat in nominal terms.

The outlook provides good news for consumers as inflation for most major food categories is projected to slow in 2024, with the exception of beef and egg prices. Looking ahead, projected egg prices fall in 2025, while continued supply constraints result in further increases in beef prices in 2025 and 2026.

The report also provides projections related to government programs, biofuel production and use, land value rates and additional insights into consumer food prices.

“FAPRI’s baseline projections implement plausible assumptions, given current conditions, to help agriculture stakeholders understand what they could expect in the next few years,” Westhoff said. “Reports like the various baseline updates can be used as benchmarks to evaluate agricultural policy changes or how other economic drivers can impact agricultural markets and farm finance conditions.”